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It takes government to really f*ck things up?
Uncle Sam, or rather the crooks in Congress are responsible for the collapse of the real estate market by giving out billions in loans to people that couldn't afford them. Of course now the same crooks in Congress seem to be ready to forgive all those loans they made. Who will pay for this f*ck up mess? Not the crooks in Congress, but us taxpayers. New rules would help underwater homeowners refinance by Julie Schmit - Oct. 24, 2011 05:16 PM USA Today Almost 1 million more homeowners over the next two years might be able to refinance their mortgages and save hundreds of dollars a month under the Obama Administration's latest fix to one of its underused foreclosure prevention programs. The changes announced Monday are intended to benefit homeowners who have continued to make mortgage payments, even as home values have sunk, but lack at least 20% equity to refinance and take advantage of today's low interest rates. The revisions could also help some owners who are underwater, owing more than their homes are worth. The administration says eligible homeowners could save about $2,500 a year in house payments, providing a small boost to an ailing economy if that money is spent elsewhere. "It's the equivalent of a substantial tax cut for these families," says Housing and Urban Development Secretary Shaun Donovan. To be eligible, homeowners must have a mortgage sold to Fannie Mae or Freddie Mac on or before May 31, 2009. They also must be current in their payments and without any late payments in the past six months. The Home Affordable Refinance Program was launched in 2009 by Obama, who said then that it would help 4 million to 5 million homeowners to refinance. Through August, HARP had only done 894,000 refinances. HARP has struggled to gain traction because lenders have resisted refinancing borrowers who lack home equity -- they're considered more at risk of default than people who have equity -- and because Freddie and Fannie tacked fees onto HARP loans they buy to lower their exposure to defaults. But that made HARP refinancing uneconomical for many borrowers. The changes announced Monday -- the biggest to date for the HARP program -- reduces some risk for lenders and mortgage insurance companies, officials say. That should encourage more lenders to compete to refinance eligible borrowers, says Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees Freddie and Fannie. Freddie and Fannie have also agreed to eliminate some fees on loans that run 20 years or less and lower them on longer-term mortgages. The exact amount won't be known for several weeks. In some cases, borrowers will also no longer need a new appraisal on the home, which should reduce refinance costs. DeMarco says the changes will not only help borrowers but will also lower risk to Freddie and Fannie because fewer borrowers will eventually default. Freddie and Fannie own or guarantee almost half of all U.S. home loans and were taken over by the government in 2008 to prevent their collapse. The changes in HARP won't help every borrower who might like to refinance. Data and analytics company CoreLogic estimates that 7 million U.S. home-loan borrowers are current on their loans, but owe more on their homes than the homes are worth and have interest rates that are about a full percentage point higher than the prevailing advertised rate. HARP has been extended twice and tweaked before to encourage more activity but those changes failed to incite the activity regulators hoped. Because of the new changes, FHFA says HARP refinancings may double from current levels. But DeMarco cautions that several factors will affect the results.. Interest rates will be one of the most important. They now average about 4.11% for a 30-year-fixed rate loan, a near historic low, the latest Freddie Mac survey shows. If interest rates rise, refinancing becomes less attractive. There's also risk that lenders -- who may already be struggling to keep up with re-fi volume -- will not aggressively pursue underwater borrowers with attractive loan terms, says Mark Zandi, chief economist of Moody's Analytics. To date, most of the HARP refinancings have been on loans in which homeowners had some equity or owed only slightly more on their mortgage than their home was worth -- even though HARP allowed refinancings for people who owed up to 25% more than their home was worth, FHFA data shows. Under the new program, there is no limit on how deeply underwater someone can be as long as they refinance into a 30-year-fixed rate mortgage. DeMarco says lender resistance is less likely now than in the past because there's less risk that lenders will be asked by Freddie and Fannie to take back loans that go sour if the mortgage-finance giants find that lenders made mistakes when they made the loans. Rep. Dennis Cardoza, D-Calif., says HARP has never helped the deeply underwater borrowers and that the new changes won't, either. "This is too little too late," he says. Zandi says the program could still have a "meaningful" impact, enabling up to 2.85 million refinancings by the end of 2013 when the program is to expire. |